KARACHI: An Income Tax Appellate bench of High Court of Sindh headed by Justice Aqeel Ahmed Abbasi deciding two identical Income Tax Reference Applications (ITRA 272 & 273 of 2011) held that retrospective application of explanation is in violation of settled law.

The ITRA’s were filed by the Commissioner, Inland Revenue, Zone I, Large Taxpayers Unit (LTU) against Madina Enterprises. The ITRA’s are directed against order passed by Income Tax Appellate Tribunal.

The applicant maintained that explanation inserted in the section 148 (9) of the Income Tax Act 2001 through Finance Act 2006 was effective retrospectively. Javed Farooqi advocate representing the applicant  prayed to the court to set aside the order by the appellate tribunal as the explanation has retrospective effect.

Khalid Mehmood Siddiqi advocate representing the respondent Madina Enterprises vehemently opposed the applications  submitting that amendment made through Finance Act 2006 was ‘substantial’ in nature and cannot be treated as “procedural” amendment. He argued that by insertion of the explanation by way of Finance Act 2006 , an additional liability was created dis-entitling the respondents from  seeking adjustment of With Holding Tax (WHT) paid at the import stage during tax years 2005 and 2006.

The counsel for respondents relied on more than a dozen case laws and said that prospective application of the said explanation would amount to violating settled law.

The bench agreeing with the arguments by the respondent’s counsel dismissed the ITRA’s holding that retrospective enforcement of the explanation would be against the settled law as per dictum laid down  by the high court as well as Supreme Court.

The respondent/importer imports Crude Palm Oil unfit for human consumption, raw material for manufacturing of vegetable ghee after refining which includes bleaching, deodorization etc.